The $20 million question: Two years in, county casts doubt on 10 CPST projects
It was the revelation heard around Greenwood County.
On Aug. 28, in front of 200 leading business and civic leaders — many of whom advocated for its adoption years ago — County Council chairman Steve Brown acknowledged at a State of the City/County forum that officials expect their final collection rate from a 2016 capital project sales tax initiative to fall well short of its advertised number, imperiling a third of the planned ventures.
“The money seems to be increasing somewhat. There’s been some changes, not that significant, but whether some of those projects are going to be funded, we’ll just see what happens a number of years from now,” Brown said at the Harris Baptist Church function. “I think for years to come, you’ll be pleased with how that money has been spent, and the positive impact it will have had on this community.”
Soon after that public announcement, county officials revealed the final collection tally could be as much as $20 million less — a total of roughly $67.9 million — than what appeared on 2016 ballots as the maximum allowable: $87,938,185.
If that number sticks, it means up to 10 of the 27 projects will be sidelined, as the extra penny can only be assessed on eligible sales tax items for eight years, under state law, although voters could renew it for an additional seven.
While county officials have said in the past the final collection number might not match what was on the ballot, no indication was ever made publicly about what that would look like. As far back as the summer of 2016, County Manager Toby Chappell said projects near the bottom of the list of 27 might not come to fruition.
“The collection of the tax has to end at either the collection of the amount identified or eight years, whichever comes first,” Chappell said during a meeting of the Capital Project Sales Tax committee on June 22, 2016. “However, it is almost certain that some of the later, more involved projects will not be finalized at the end of eight years.”
Ahead of the vote, no county official gave a range of how many projects might end up zeroed out — instead only saying some might have faced that prospect.
The referendum question itself — which specifies that collection is only allowed for eight years — remains on the county’s website, easily accessible for review under the “Our County” drop-down menu.
A search of Index-Journal archives and interviews with all members of County Council and other parties revealed that since Chappell issued that 2016 disclaimer, public updates on collection rates have been sparse.
In February 2018, for instance, the County Council approved a memorandum of understanding with the Greenwood Genetic Center on a plan to reimburse it for $358,283 using capital project sales tax revenues. Sitting in the 21st slot on the list, the county was clear at that meeting the research facility might never recoup its investment.
“Greenwood County makes no guarantee as to when, or if, funds will be available to reimburse the GGC for this project,” the MOU says. “The GGC is undertaking this project now, at its own risk, understanding that Greenwood County will not indemnify the GGC for any liability, financial or otherwise, associated with this project.”
County Council member Mark Allison said he was never privately briefed on the state of collection rates.
“I know the way those projects were, the numbers don’t always come in the way you predict them to do but as far as where that is, honestly and truly, I have no idea,” he said. “I had no conversations with anybody about it.”
Brown said as much himself days after his remarks — made at the same platform used in 2015 to formally announce the county’s intention to seek its second capital project sales tax in a decade.
“Council has not taken a formal position, there’s not been any formal votes. Nobody told me what to say the other day, it was not a formal position of County Council. Those questions were given to me at the last minute and I was just attempting to be as open as I possibly could,” Brown said. “We hadn’t sat around a table and said, ‘We have to divulge this.’”
County Council member Edith Childs declined comment on the matter via text message, referring all questions to Brown and Chappell, but said she was aware of the projected shortfall prior to it being made public.
County Council member Robbie Templeton did not respond to a text message seeking comment, nor did he return messages left on his personal and work voicemails, and councilwoman Melissa Spencer could not be reached for comment — a recorded message said her voice mailbox was full.
With 65% of county voters agreeing to the levy — tacked onto all eligible sales tax items — the county had reason to be confident. After winning approval in 2006 for a first-of-its-kind revenue generation stream in Greenwood County, officials were able to realize $43 million over six years, constructing a new library, building up funds to eventually pay for a federally mandated spillway at the Buzzard Roost dam on Lake Greenwood and retiring millions in outstanding debt.
But for several people closest to the 2016 initiative, including the chairman of a committee assembled to make recommendations about which projects should have made the final cut, Brown’s comments were more eyebrow raising than nostalgic.
“I attended the state of the City/County event. The discussions about the shortfall was the first time I heard about this issue,” David Tompkins wrote.
Tompkins, who responded to a series of Index-Journal questions via email, was chairman of the lead committee that was part of a process that culled the original list of 43 projects and $160 million worth of investment to the 27 that appeared on 2016 ballots, carrying a total cost of $87.9 million — a figure derived from state Office of Revenue and Fiscal Affairs projections, knowledge of the local economy and data from yearly sales tax collections through the 2006 ballot measure.
Frank Rainwater, executive director of the office, said in 2014-15 the county had $617.4 million in total net taxable sales, leading to an estimate in the 2016-17 fiscal year of $5.81 million in revenue from the 1% tax.
“Please also note that our current expectation for the state is continual growth and if there is any significant change in the economy, this estimate would be affected,” Rainwater wrote to then County Treasurer Sharon Setzer on Sept. 10, 2015.
He added that “startup or compliance issues may impact this estimate. Hopefully, any such impact would be minimal, but we would recommend budgeting a lower amount with the hope that more revenue will be collected in the first year.”
With two years of collections now in hand, the county has already surpassed the state’s forecast.
To date, the county has banked $17.52 million through two full years of collections — outpacing the state’s projection by a healthy margin, with $8.44 million taken in during the first year and $9.07 million in 2018 — an annual average of $8.76 million, and a 7.5% year-over-year growth clip.
With eight quarters’ worth of revenue checks, the county only recently had a “firm base of data” to present forward-looking estimates to stakeholders, Chappell, who responded via email to a series of Index-Journal questions, wrote.
“Greenwood County felt it was important to have a firm base of data (8 quarters of actual revenue) so that we would not inform stakeholders to make alternative plans without sound justification. Once we felt that we had sufficient data we met with the effected (sic) stakeholders to apprise them of this information and Wednesday (at the State of the City/County luncheon) the chairman of County Council advised the public,” Chappell wrote.
Josh Skinner, the county’s capital projects coordinator, said waiting any longer to have gone public with anticipated collection rates would have been irresponsible.
“I don’t think it was premature. We are one quarter of the way through the eight-year collection period. We want to be upfront with what we are collecting and what we actually have in the bank. We would rather let these entities know where they stand now rather than right before they were ready to start their project,” he said in an email.
Since June 30, 2013, the county has posted quarterly reports on capital project and sales tax expenditures from its first round of collections, with the most recent from June 30, 2018.
That’s because nearly half of the money — $21.2 million — remains unspent as local officials continue to negotiate with federal regulators over design parameters for the Buzzard Roost spillway.
The statements are available publicly at greenwoodcounty-sc.gov., under the treasurer’s department.
But absent from that page is any data about expenditures or collections from the 2016 assessment, which took effect on May 1, 2017.
A number of investments are already underway because of the 1% levy, including construction on the William “Billy” O’Dell Center for Upstate Manufacturing Excellence at Piedmont Technical College, initial planning and construction estimates for an expansion of the GLEAMNS Dr. Benjamin H. Mays Historical Preservation Site and a sewer line replacement in Ware Shoals, which is ready for construction pending final review by the state Department of Health and Environmental Control.
“The commission was given proposed projects from the various committees that reviewed the initial project list. The commission was also given revenue projections from the proposed sales tax. We then worked to finalize the project list for approval by County Council,” Tompkins said. “Based on the project and revenue projections, it was my understanding that all the projects would be funded.”
A close reading of the referendum question shows the amount to be raised would be an all-encompassing figure to include construction and engineering costs and property acquisition.
“The proceeds of the tax may be used for construction, improvement or procurement of the capital projects listed above, and may also be used for design, engineering, project management and other professional services related to the same,” Section 5 of the question reads.
Minutes from a March 30, 2016 meeting of the capital project sales tax’s lead committee show that officials honed in on a number months earlier.
“Mr. Chappell passed out the worksheet to address the first question, where to set the number. The numbers already listed are the numbers relative to today’s dollars. What is a reasonable figure that will take into consideration an 8 year endeavor with revenue and costs increasing over time. Mr. Chappell described the worksheet. The number that has been calculated to work with is $88,400,000,” according to the minutes, which are posted on the county’s website.
“The capital project sales tax is based on projections, both of anticipated revenue and expenditures,” Chappell wrote in an emailed reply. “The quote that you have cited was our attempt to take dollars from the year 2016 (both revenue and expenditures) and show what these same dollars would have to be over the next 8 years to equal the value of the 2016 dollar.”
By April 7, 2016, the final list of recommended projects was complete, with the committee deciding to take 1.3% of funding from each — a total of roughly $1 million — to contract out management.
Ware Shoals Mayor Bruce Holland was told last month in a meeting with county officials that a $3.9 million allocation from the pool of money to aid in the restoration of Katherine Hall was likely not going to happen.
“That project was right at the cut line and they informed us at that point in time that likely it won’t get funded,” Holland said.
Built in 1913 by Benjamin Riegel as an entertainment and cultural hub for workers at his mill, the 15,637-square-foot building named for his only daughter was deeded to the town in 1967, upon its incorporation.
Slated as the 18th recipient of capital project sales tax revenues, Holland said without the expected funding, modernizing the landmark would be impossible.
“If it can be refurbished and be a center point of this community, I think it would be wonderful, but the bottom line is the town cannot refurbish this building. So without this one-cent tax, it’s not going to be done,” he said.
Also in question is whether the Greenwood County Detention Center will receive $429,939 for repairs and maintenance.
“County Council has always taken care of the sheriff’s office needs, and I am confident that they will identify funding if the capital sales tax funding is not available,” Sheriff Dennis Kelly said in a text message.
The money, Kelly said, would go toward security enhancements such as new cell doors, metal detectors and lighting.
“In the current county budget, it is already approved to replace both A and B unit roofs at the detention center totally unrelated to the capital project sales tax,” Kelly said. “When there was an issue with the cell locks in B unit, the County Council found the money to make their situation safe without using CPST funding.”
Jeff Meredith, general manager of the Greenwood Commissioners of Public Works, was also notified that more than $7 million included on the roster of projects to install new water lines and fire suppression infrastructure in the areas of Harris Landing and Highway 25 South would likely not be realized.
“We do not have any alternative funding plans to proceed with these projects at this time,” Meredith said.
Also on the bubble would be a $1.2 million earmark to The Museum for construction of an exhibition hall to replicate the former Southern Passenger depot that sat along Greenwood’s Main Street.
Museum Director Karen Jennings said she was notified in advance of the luncheon their project likely would fall off the table.
“We did know about the shortfall and that we would not be receiving funding with this tax. The manager of the capital tax project came to tell us in person,” Jennings said. “We are looking at other options, In fact, our board is scheduling a planning and strategy session to look 5 and 10 years down the road to assess our mission, and the best way we can use our train museum and its grounds, and well as how to finance its continued operations.”
Bonnie “Boo” Ramage, interim executive director of the Greenwood Genetic Center Foundation, said campus administrators couldn’t afford to wait to upgrade the facility’s fiber optics network.
“We understood the risk that we might not be reimbursed, but the project needed to proceed. We remain hopeful that the tax collections will improve, original revenue projections are met, and that we might still see reimbursement before the collection period expires,” Ramage said in an email.
Greenwood County Council member Theo Lane — a candidate at the time — was chairman of the capital project sales tax economic development committee and also advocacy chairman for the Greenwood SC Chamber of Commerce in 2016, said assuming the venture will end up $20 million short of projections is premature.
Lane went on to defeat Bob Fisher in that November election.
“I don’t know if we can make that assumption,” Lane said. “I think we’re kind of leaping to think we’ll be $20 million off.”
County Council member Chuck Moates agreed.
“It’s sort of a crapshoot if you ask me. How can you tell something that’s seven years out? You don’t know what kind of economic downturn or upturn will take place,” he said.
Why the hedging?
Aside from the impossibility of predicting the future, what if Greenwood finally lands another big box retailer such as Target? What if state lawmakers make changes to items that can be assessed a sales tax? And what if a project on the list of 27 finds an outside funding source?
“These are projections of events that are not going to happen until the future. No one can tell you today if the 2016 Capital Project Sales Tax will or will not meet expectations in May 2025. There are too many variables that are in play for anyone to accurately make that assessment,” Chappell wrote.
In March, members of a state House tax policy review committee said broadening the base of goods that can be assessed is critical to South Carolina’s long-term financial health.
House research director Don Hottel said at that meeting an immediate change to the system isn’t possible and would have to be rolled out over consecutive years for planning purposes.
“On anything you do, the implementation’s going to be critical. Any changes even of a small magnitude will require substantial phase-in periods,” he said. “If you don’t broaden the base, there is some pressure in the future to raise the rate just to maintain the revenue that you have. The primary issue for policymakers is that sales tax revenues are declining and the state’s dependence on tangible goods is changing.”
A December 2018 Tax Foundation report issued in partnership with the South Carolina Chamber of Commerce outlined some of the ways the state’s 6% sales tax rate is inhibiting economic growth.
“South Carolina, under its state sales tax, does not tax food, candy, and soda, or prescription and nonprescription drugs. The state also imposes low caps on the maximum amount of sales tax owed on the purchases of automobiles (currently set at $500). It thus exempts a sizable and stable portion of consumer spending. The state also exempts most services and select other goods. By law, tangible personal property is included in the sales tax base unless expressly exempted, whereas services are only subject to tax if specifically enumerated,” the report said.
The 6% assessment is on top of any local option taxes implemented by cities or counties. The rate has doubled since first being assessed in 1951.
Perhaps county leaders have reason to believe they’ll end the collection cycle as close to the original goal as they’ve hoped.
“Each quarter, year over year, has shown an increase in actual revenue and I am not aware of anything, as of today’s date, that would materially change this trajectory,” Chappell wrote.
Skinner offered a similar assessment.
“It would be unrealistic to assume no growth over the next six years, which is why we did not. Chairman Brown stated that the revenue actuals are not meeting the revenue projections. That is all that was said,” he said in an email. “We are being cautious, using our quarterly average over the first two years and giving a very conservative estimate as to how much we will collect by 2025.”
A December 2018 report by the University of South Carolina’s Darla Moore School of Business showed consumer spending was up across the board in the sales tax-heavy sectors of wholesale trade, retail trade and leisure and hospitality, while income growth from the third quarter of 2018 through the first four months of 2019 fluctuated between 4.1% and 4.5%.
Statewide personal income increased to $223.8 billion through the first quarter of 2019, according to an August economic outlook compiled by the state Department of Commerce.
In the run-up to 2016 Election Day, public sector critics of the 1-cent tax were hard to find. The Greenwood SC Chamber of Commerce was retained as its marketing arm. And in November 2015 the Greenwood Partnership Alliance’s governing board was told the agency’s Foundation for a Greater Greenwood County committed $15,000 for advertising and promotion.
Angelle LaBorde, the chamber’s president and CEO, said officials remain fully behind the sales tax measure, no matter how much ends up being raised.
“This initiative is critically important to businesses and residents so that Greenwood remains competitive and continues to offer a quality of life that we have all come to enjoy. Regardless of the amount of money ultimately collected, many of the proposed capital projects would not otherwise have been completed if not for this initiative,” she said.
“As a county, we chose to invest in ourselves and in projects that add value to our community. Our hope is that collections will improve over the next several years so that more of the remaining projects come to fruition,” LaBorde added.
But less than three weeks prior to the vote, then County Councilman Bob Fisher urged residents to scrutinize the PR pitch.
He wanted to know what documentation was provided to CPST commissioners justifying Piedmont Tech’s $6 million ask.
“It is also promoted that a percentage of the penny sales tax will come from people who do not reside in Greenwood County. I have heard as much as 30 to 40 percent, but have not seen this documented,” Fisher wrote in an Index-Journal guest column on Oct. 28, 2016. “I do not support the Chamber telling you to vote yes, nor do I support anyone who tells you to vote no.”
Fisher, who lost his council seat to Lane during that same election, said that county leaders should have briefed the public on the state of its collections prior to the controlled State of the City/County event.
“I’m not ready to throw any of my former colleagues under the bus, I am kind of curious as to why. To be off $20 million? I think somebody needs to have a clear explanation of what went wrong,” Fisher said. “Don’t go around trying to find some fancy way to disguise it. Admit it, get it out into the open and just go on.”
County Council had an opportunity to make the public aware of its collection rate during a scheduled meeting on Sept. 3, but the subject was never broached.
Holland, the Ware Shoals mayor, said a broader announcement by county officials over the state of its collections could have helped alleviate taxpayer concern.
“The best way I can answer is this. I hate surprises,” he said. “I guess my concern would be right now, if you wanted to do this thing again, would the citizens support this feeling like they were done wrong? It could have been communicated better, I guess.”
Originally Published by Index-Journal on:Sep 8, 2019
By ADAM BENSON abenson@indexjournal.com
